The Hinduja group was the only participant in the second round of the Reliance Capital (RCap) bankruptcy auction, held on Wednesday. He made an offer of Rs 9,650 crore as a down payment to the indebted company's lenders, still well below the liquidation value of Rs 13,000 crore.
Torrent, which was the highest bidder in the first round with a bid of Rs 8,640 crore, did not participate in the latest auction. American financial powerhouse Oaktree also stayed away.
An industry source said Torrent did not participate in the auction because there was a lack of clarity about the process and their concerns were not addressed. Torrent moved the Supreme Court in March after RCap's lenders decided to hold a second auction to maximize the value of its assets.
If its offer is accepted, the Hinduja group, which has a stake in IndusInd Bank, will take over two profitable insurance companies currently owned by RCap. Torrent declined to comment on his future plans. An email sent to the Hindujas got no response.
In the first round of the auction, Hindujas was the second highest bidder with a bid of Rs 8,110 crore. But within hours of the auction's conclusion, the group submitted a revised offer of Rs 9,000 crore, prompting lenders to seek a second auction.
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Torrent challenged the Hindujas takedown bid and also the legality of the second auction and moved the court. The matter is currently pending before the Supreme Court, which has allowed RCap's lenders to hold another auction, but any outcome will be subject to its final judgment in the matter. The next hearing date in the matter is scheduled for August of this year.
In a letter to the creditors' committee (CoC), announcing his decision not to bid in the second auction, Torrent reiterated his position on the "illegality" of a second auction, saying it was in serious breach of current bankruptcy laws. Torrent said the process remains arbitrary and vague as the CoC decided not to freeze resolution plans (except for the financial proposal) before the expanded challenge mechanism. This would allow a bidder to re-fault the process by changing his presentation outside of the auction.
Torrent said the CoC offered no finality in the process even after the second auction and that it reserved the right under the auction to continue negotiating with the resolution applicant that made the best offer.
Such a right to bargain only with the highest bidder was not provided to Torrent despite emerging as the highest bidder in the first auction that concluded in December last year.
Torrent further said that such an open process is just a breeding ground for more knockdown bids by wayward bidders and the ensuing litigation that leads to more delays.
RCap, formerly owned by Anil Ambani, was sent for debt resolution under the Bankruptcy and Insolvency Code of 2016, after the company defaulted on its debt worth Rs 24,000 crore.
